Las Vegas Sun

March 28, 2024

Guest Column:

LV ideal for franchise companies

Matthew Kreutzer

Matthew Kreutzer

Week after week, we are bombarded with news about the recession in Las Vegas. As the rest of the nation appears to be in recovery, our city is lagging behind. And none of us is surprised, given that our economy is still so dependent on one industry. As gaming goes, so goes Las Vegas.

So, what are we doing to change that? Much lip service has been given to economic diversification, but progress in that area is slow.

Diversification is something we should have focused on more closely during the boom we experienced half a decade ago (hindsight being 20/20).

Tourism still accounts for a large percentage of our economic activity. Until the opposite is true, it is important to discuss ways that we can grow noncore industries in Las Vegas.

A variety of ideas about the “right” industries for expansion have been circulated for years. These include sustainable (solar, wind, and geothermal) energy, health care (capitalizing on the development of the Nevada Cancer Institute and the Cleveland Clinic Lou Ruvo Center for Brain Health), technology and data storage; and others. This, however, raises the questions: Are we doing enough to attract these industries? And, what are we doing to reach out to businesses in other industries?

Other states use tax and other economic incentives to lure businesses. For example, New Mexico offers film and television companies a 25 percent tax rebate on all production expenditures that are subject to taxation, plus a film production loan program with profit participation in lieu of interest. California offers up to a 25 percent tax credit to these same companies. Unlike other states, however, tax and other economic incentives are not heavily used in Nevada. This means that we have to rely on the other aspects of our state that make it so attractive to businesses in the first place.

As a franchising attorney, my view on diversification is that these “other” aspects of our state make Las Vegas an ideal home for franchise companies. First, we have no corporate tax and no personal income tax. This means that right off the bat, a franchiser moving from a high-tax state such as California will realize a significant increase in net income on an annual basis. Not only that, but the franchiser’s employees will see an increase in their paychecks. I myself benefited from this pay “bump” when my wife and I moved here from Maryland seven years ago.

Second, a franchiser moving to Las Vegas will have access to McCarran International Airport, which remains one of the busiest airports in the country. It’s still relatively easy to find nonstop flights from Las Vegas to just about anywhere in the country. This makes access to Las Vegas easy for prospective and new franchisees to fly to the franchiser’s headquarters for discovery day and initial franchise training. Moreover, the city’s plentiful (and currently cheap) hotel rooms make finding accommodations for them a snap. And, even in this down economy, Las Vegas is still the entertainment center of the universe. This is the reason that most franchise systems still choose to hold their annual conventions in Las Vegas.

Of the regional, national, and international franchisers that are already based in Nevada, some have moved here from other states — and one franchiser even moved here from another country. Those franchise companies have enjoyed all of the benefits that Nevada has to offer. The continued success of these companies is evidence that our state is a great place for franchisers to call home.

Of course, our biggest hurdle in attracting nongaming companies is overcoming the city’s image. Our reputation as “Sin City” is well-known and well-earned. To persuade businesses to move here, we would need to sell the other side of Las Vegas, the side that is away from the Strip. We all know that Las Vegas is a great place to live and work, but we need to be able to convince business owners from other states of that fact.

There are many opportunities each year to reach franchise companies in a personal way to talk to them about the benefits of moving to Las Vegas. Of the thousands of franchise companies that are in business nationwide, several hundred of them choose to hold their annual conventions in Las Vegas. The International Franchise Association — the largest industry organization — will be holding its large and well-attended annual convention in Las Vegas next year, as well as smaller conventions geared toward financing and multiunit development. The city should capitalize on these opportunities by meeting with company owners to sell the benefits of moving their company headquarters to Las Vegas.

Matthew Kreutzer is an attorney with the law firm Armstrong Teasdale

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